What Is a Payday Loan?

Payday loans are short-term, high-i𝔍nterest loans that lenders make based on your income. The amount of the loan is generally equal to a portion of your next paycheck.

Payday loans can provide quick cash, but they charge high interest rates and are often described as a form of predatory lending. Even if you have bad credit, it's important to check out your other options, such as a 澳洲幸运5官方开奖结果体彩网:personal loan or an 澳洲幸运5官方开奖结果体彩网:emergency loan, before considering a payday loan.

How Payday Loans Work

Payday loans go by a number of names in different places around the country, and there is no universally accepted definition for them. But they typically are short-term loans for amounts of $500 or less. In general, they must be repaid in full on the borrower's next payday, or when the borrower receives other income, such as a Social Security payment. As such, they typically have terms of two to four weeks.

Payday loans are characterized by their high interest rates. For example, a two-week loan for $100 with a $15 fee equates to an 澳洲幸运5官方开奖结果体彩网:annual percentage rate (APR) of 390%. You ♑can calculate this by extrapolating the $15 every two weeks over a full year. That comes to $390 on what originally was a $10 loan.

At the time of the loan, the borrower will usually authorize the lender to automatically deduct the funds from their bank account on the due date if they haven't already made their payment or else write a post-dated check to cover the balance plus interest and fees. In some states, borrowers who are unable to repay the loan at that point can roll it over into a new loan, digging themselves further into debt.

Allowing payday lenders access to borrowers' bank accounts has created problems in its own right. According to the CFPB, some lenders have made repeated attempts to withdraw money from borrower accounts, even after it's clear the money isn't there. (In one instance, the CFPB said, a lender made 11 attempts in a single day.) As a result, borrowers can be subject to multiple overdraft or nonsufficient funds fees from their banks. A CFPB rule limits lenders to two such attempts after surviving a challenge from the payday lending industry that went all the way to the U.S. Supreme Court.

How to Get a Payday Loan

You can apply for payday loans at various online providers or local ⛄storefront lenders.

For 澳洲幸运5官方开奖结果体彩网:a payday loan application, you will need a bank or similar acc🔥ount and a government ID. You also need to provide proof of income, which can be done through your recent work pay stubs.

Payday lenders will not normally run a credit check on you. Their loans are also unsecured, meaning that you don't have to put up any collateral as you would, for example, with a car loan. However, as mentioned earlier, you will have to give the lender authorized access to your bank account or write a post-dated check for the full amount you'll owe.

Payday Loan Interest Rates

While most states have usury laws that limit interest charges to anywhere between 5% and 30%, 澳洲幸运5官方开奖结果体彩网:payday lenders fall under exem♛ptions tha🉐t allow them to charge many times that in certain states.

Thirty-seven states have laws that permit payday loans, although many put some restrictions on them and some prohibit them altogether.

In California, for example, a payday lender can only lend up to $300 at a time. It also can charge a fee of up to 15% of the loan amount, with a maximum fee total of $45. Although 15% doesn't seem exceptionally high, on a 14-day loan, it becomes the equivalent of an APR of 390%.

While the federal 澳洲幸运5官方开奖结果体彩网:Truth in Lending Act requires payday lenders to disclose their finance charges, many people apparently overlook the costs in their hurry to get the cash.

The Bottom Line

Payday loans are designed to cover short-term expenses, and they can be taken out without a credit check or providing any collateral. The catch is that these loans charge very high fees and interest rates. If you're considering a payday loan, then you may want to first take a look at alternative 澳洲幸运5官方开奖结果体彩网:emergency loans for bad credit.